Offshore oil drilling protest: Companies tell judge 'no more'

Offshore oil drilling moratorium could cost Louisiana thousands of jobs and millions of dollars in lost wages, according to one company.

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The ship Discover Enterprise sits over the incident site as it burns off crude from the oil spill in the Gulf of Mexico, USA.

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June 21, 2010

By Michael KunzelmanAP

New Orleans

Companies that ferry people and supplies to offshore oil rigs asked a federal judge Monday to lift a six-month moratorium on new deepwater drilling projects imposed in the aftermath of the massive Gulf spill.

The April 20 disaster killed 11 workers and blew out a well that has gushed anywhere from 68 million to 126 millions of oil into the Gulf.

BP said Monday it has spent $2 billion in two months fighting the spill and compensating victims, with no end in sight. It's likely to be at least August before crews finish two relief wells that are the best chance of stopping the flow of oil.

The British oil giant released its latest tally of response costs, including $105 million paid out so far to 32,000 claimants. The figure does not include a $20 billion fund that BP PLC last week agreed to set up for Gulf residents and businesses hurt by the spill.

Kenneth Feinberg, who has been tapped by President Barack Obama to run the fund, said many people are in desperate financial straits and need immediate relief.

"Do not underestimate the emotionalism and the frustration and the anger of people in the Gulf uncertain of their financial future," he said.

Feinberg, who ran the claim fund set up for victims of the Sept. 11, 2001, terrorist attacks, said he is determined to speed payment of claims.

Shares of BP, which have lost about half their value since the rig Deepwater Horizon burned and sank off the Louisiana coast, fell nearly 3 percent Monday in New York trading to $30.86. The rig was owned by Transocean Ltd. but run by BP.

BP chief executive Tony Hayward canceled a scheduled Tuesday appearance at a London oil conference, citing his commitment to the Gulf relief effort. The last-minute pullout followed stinging criticism of Hayward's attendance at a yacht race on the Isle of Wight off the coast of southern England on Saturday.

Obama's administration has also been struggling to show it is responding forcefully to the spill. As part of that effort, the Interior Department halted the approval of any new permits for deepwater drilling and suspended drilling at 33 existing exploratory wells in the Gulf.

But a lawsuit filed by the Covington-based Hornbeck Offshore Services of Covington, La., claims the government arbitrarily imposed the moratorium without any proof that the operations posed a threat. Hornbeck says the moratorium could cost Louisiana thousands of jobs and millions of dollars in lost wages.

"This is an extraordinary time for the Gulf Coast. It calls out for an extraordinary remedy," plaintiffs' attorney Carl Rosenblum said in court Monday.

Government lawyers said the Interior Department has demonstrated that industry regulators need more time to study the risks of deepwater drilling and identify ways to make it safer.

"There is a lot the department does not know, and that's precisely why it's important to conduct these studies and learn more," said Justice Department attorney Guillermo Montero.

Feldman asked a government lawyer why the Interior Department decided to suspend deepwater drilling after the rig explosion when it didn't bar oil tankers from Alaskan waters after the Exxon Valdez spill in 1989 or take similar actions in the wake of other industrial accidents.

"The Deepwater Horizon blowout was a game-changer," Montero said. "It really illustrates the risks that are inherent in deepwater drilling."